Wednesday, May 27, 2009

Easy Guide To Transferring a Credit Card Balance To a Better Credit Card

by: Debbie Dragon

Transferring a high interest credit card balance to one with a better
interest rate and/or better overall terms and features is usually a
good way to reduce the amount of money you pay back on your existing
debt. Depending on the "better" credit card you select, you may also
be able to benefit from a rewards program or gain other features you
didn't already have – including travel accident insurance coverage or
an extended warranty program for new purchases made with the card.
There are a few instances when a balance transfer is not the great
deal it appears at first glance though, so it's important to do your
research before moving your accounts around.

If you want to take advantage of a balance transfer offer, use this
guide for a smooth transition from one card to the other, and avoid
costly or time consuming mistakes:

Step One: Find a better credit card with a balance transfer offer.

There is no point moving money from one credit card to another unless
you are going to benefit from it in some way. Sometimes people are
mislead by the introductory rates and promotional offers – so it is
important that you dig a little beneath the surface to see what sort
of rates you'll be charged once the promotional period ends.

When looking at possible cards to replace your existing credit card,
make sure you find out the following information in order to make an
accurate comparison between your existing card and the new card:

What is the introductory rate and when does it end? Does the
introductory rate apply to new purchases only? Does it apply to
balance transfers? What is the cards APR (annual percentage rate) once
the introductory offer is over? Does the card have an annual fee? How
much is it?

This is an important consideration when looking at a card to move your
existing balances to - What does the card charge for a balance
transfer fee? Many cards charge 3-4% fees for transferring balances.
If you've got a $4,000 balance on your card that you're moving to a
new card, you're looking at a fee between $120 and $160 just to move
the balance. If you're going to pay a balance transfer fee, you're
going to need to save a whole lot of money in interest over the life
of the balance on the new card in order to make that fee worth it.

Step Two: What are your chances of getting approved for the new card?

Just because a credit card offers a 0% or 2% interest rate on balance
transfers does not mean that you will be approved for that offer.
Cards always put their best foot forward; but sometimes people are
approved for the cards under different terms, based on their credit
scores and payment histories. Take a close look, because often the
credit card you apply for will tell you that if you don't qualify for
the terms of the offer they will issue you a credit card with higher
interest rates or different overall terms. If this happens, will the
higher rates be beneficial to you, or will you just end up with a
second credit card that charges a fortune in fees and interest and the
temptation to spend more because you have a new credit line available?

Step Three: Apply

If you find a card with a great offer that you've compared closely to
your existing card and feel that you will save money through the new,
lower interest rate and/or through the rewards program the new card
offers – AND you've considered your realistic chance of being approved
for that card and all seems ready to go; it's time to apply.

When applying for the new card, make sure to fill out the balance
transfer portion at the time of application. The reason for this is
sometimes the balance transfer offers are only good for immediate
balance transfers that occur at the time of account opening. Balance
transfers that are initiated later may be considered a cash advance
and do not enjoy the same promotional terms your initial transfers do.

Step Four: Stop Using Old Card

If you've transferred the balance to a new and improved credit card,
stop using your old credit card. Cut it up or put it away so you
aren't tempted to charge on it. If you transfer the balance and then
continue to use your old card, you've completely defeated the purpose
of moving the money and now have TWO credit cards to pay off!

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